Steadfast Income REIT 10-Q 2015 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2015

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from  to

Commission file number 000-54674

STEADFAST INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	27-0351641
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer o Accelerated filer o Non-Accelerated filer þ (Do not check if smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 6, 2015, there were 76,674,502 shares of the Registrant’s common stock issued and outstanding.

STEADFAST INCOME REIT, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	2
Consolidated Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014 (unaudited)	3
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2014 and for the nine months ended September 30, 2015 (unaudited)	4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (unaudited)	5
Condensed Notes to Consolidated Financial Statements as of September 30, 2015	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	55
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	56
Item 1A. Risk Factors	56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	58
Item 5. Other Information	58
Item 6. Exhibits	58
Signatures	59

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	174,102,422		$	174,102,422
Building and improvements	1,482,832,620			1,457,633,918
Tenant origination and absorption costs	—			524,712
Other intangible assets	2,644,263			2,644,263
Construction-in-progress	708,925			2,048,098
Total real estate, cost	1,660,288,230			1,636,953,413
Less accumulated depreciation and amortization	(146,650,452		)	(98,342,452		)
Total real estate, net	1,513,637,778			1,538,610,961
Cash and cash equivalents	36,024,455			29,529,312
Restricted cash	26,250,811			25,478,939
Rents and other receivables	3,262,403			1,992,310
Deferred financing costs and other assets, net	10,894,815			13,455,606
Total assets	$	1,590,070,262		$	1,609,067,128
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	43,208,759		$	39,527,928
Notes payable:
Mortgage notes payable, net	1,098,940,967			1,070,757,025
Revolving credit facility	20,000,000			14,000,000
Total notes payable, net	1,118,940,967			1,084,757,025
Distributions payable	4,529,332			4,679,455
Due to affiliates, net	1,946,090			3,039,490
Total liabilities	1,168,625,148			1,132,003,898
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $0.01 par value per share; 999,999,000 shares authorized, 76,872,491 and 76,858,483 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	768,725			768,585
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2015 and December 31, 2014, respectively	10			10
Additional paid-in capital	676,069,449			680,138,132
Cumulative distributions and net losses	(255,393,070		)	(203,843,497		)
Total stockholders’ equity	421,445,114			477,063,230
Total liabilities and stockholders’ equity	$	1,590,070,262		$	1,609,067,128

See accompanying condensed notes to consolidated financial statements.

2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues:
Rental income	$	47,233,877		$	44,846,735		$	139,155,382		$	130,015,288
Tenant reimbursements and other	5,932,544			5,370,882			17,306,141			15,106,092
Total revenues	53,166,421			50,217,617			156,461,523			145,121,380
Expenses:
Operating, maintenance and management	14,681,517			13,871,055			40,275,265			39,714,602
Real estate taxes and insurance	8,524,454			9,211,396			27,310,197			26,412,787
Fees to affiliates	5,660,066			5,603,741			16,441,909			18,233,188
Depreciation and amortization	16,496,386			15,975,228			48,832,712			53,637,688
Interest expense	10,019,513			9,095,277			29,527,109			30,292,922
Loss on debt extinguishment	—			1,047,932			—			1,939,817
General and administrative expenses	1,388,213			1,366,537			4,405,988			4,552,527
Acquisition costs	—			255,864			7,145			1,356,146
Total expenses	56,770,149			56,427,030			166,800,325			176,139,677
Loss from continuing operations	(3,603,728		)	(6,209,413		)	(10,338,802		)	(31,018,297		)
Gain on sales of real estate, net	—			2,871,840			—			9,944,134
Net loss	$	(3,603,728	)	$	(3,337,573	)	$	(10,338,802	)	$	(21,074,163	)
Loss per common share — basic and diluted	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.28	)
Weighted average number of common shares outstanding — basic and diluted	76,370,121			75,792,897			76,371,860			75,151,322
Distributions declared per common share	$	0.181		$	0.181		$	0.537		$	0.537

See accompanying condensed notes to consolidated financial statements.

3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2014

AND FOR THENINE MONTHS ENDED SEPTEMBER 30, 2015 (Unaudited)

	Common Stock					Convertible Stock			Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares		Amount			Shares	Amount
BALANCE, December 31, 2013	74,153,580		$	741,538		1,000	$	10	$	640,181,521		$	(123,804,541	)	$	517,118,528
Issuance of common stock	2,496,806		24,968			—	—		24,170,846			—			24,195,814
Issuance of restricted common stock to Advisor	488,281		4,883			—	—		4,995,117			—			5,000,000
Transfers from redeemable common stock	—		—			—	—		13,393,647			—			13,393,647
Redemption of common stock	(280,184	)	(2,804		)	—	—		(2,721,144		)	—			(2,723,948		)
Distributions declared	—		—			—	—		—			(54,296,664		)	(54,296,664		)
Amortization of stock-based compensation	—		—			—	—		118,145			—			118,145
Net loss for the year ended December 31, 2014	—		—			—	—		—			(25,742,292		)	(25,742,292		)
BALANCE, December 31, 2014	76,858,483		768,585			1,000	10		680,138,132			(203,843,497		)	477,063,230
Issuance of common stock	14,008		140			—	—		(62		)	—			78
Transfers to redeemable common stock	—		—			—	—		(4,267,538		)	—			(4,267,538		)
Distributions declared	—		—			—	—		—			(41,210,771		)	(41,210,771		)
Amortization of stock-based compensation	—		—			—	—		171,486			—			171,486
Change in value of restricted common stock to Advisor	—		—			—	—		27,431			—			27,431
Net loss for the nine months ended September 30, 2015	—		—			—	—		—			(10,338,802		)	(10,338,802		)
BALANCE, September 30, 2015	76,872,491		$	768,725		1,000	$	10	$	676,069,449		$	(255,393,070	)	$	421,445,114

See accompanying condensed notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2015			2014
Cash Flows from Operating Activities:
Net loss	$	(10,338,802	)	$	(21,074,163	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	48,832,712			53,637,688
Accretion of below-market leases	—			(163,237		)
Amortization of deferred financing costs	1,183,398			1,115,818
Amortization of stock-based compensation	171,486			94,538
Change in value of restricted common stock to Advisor	27,431			—
Amortization of loan premiums and discounts	(926,094		)	(926,095		)
Change in fair value of interest rate cap agreements	1,908,550			3,362,058
Loss on debt extinguishment	—			145,816
Gain on sales of real estate	—			(9,944,134		)
Bad debt expense	1,499,637			1,370,772
Changes in operating assets and liabilities:
Restricted cash for operating activities	(1,071,569		)	549,660
Rents and other receivables	(2,769,730		)	(1,116,619		)
Other assets	360,694			(274,697		)
Accounts payable and accrued liabilities	(1,082,251		)	4,875,095
Due to affiliates, net	(1,093,400		)	800,275
Net cash provided by operating activities	36,702,062			32,452,775
Cash Flows from Investing Activities:
Acquisition of real estate investments	—			(110,388,964		)
Additions to real estate investments	(23,363,985		)	(18,082,456		)
Escrow deposits for pending real estate acquisitions	—			(3,120,400		)
Restricted cash for investing activities	299,697			(3,893,968		)
Purchase of interest rate caps	(296,250		)	(826,284		)
Proceeds from sales of real estate, net	—			29,761,182
Net cash used in investing activities	(23,360,538		)	(106,550,890		)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	83,246,333			120,583,585
Principal payments on mortgage notes payable	(54,136,297		)	(45,913,275		)
Borrowings from credit facility	6,000,000			35,000,000
Principal payments on credit facility	—			(35,000,000		)
Proceeds from issuance of common stock	—			26,561,229
Reimbursement of other offering costs to affiliates	—			(3,105,246		)
Payment of deferred financing costs	(595,601		)	(1,436,113		)
Distributions to common stockholders	(41,360,816		)	(20,284,125		)
Redemptions of common stock	—			(1,632,018		)
Net cash (used in) provided by financing activities	(6,846,381		)	74,774,037
Net increase in cash and cash equivalents	6,495,143			675,922
Cash and cash equivalents, beginning of period	29,529,312			19,349,492
Cash and cash equivalents, end of period	$	36,024,455		$	20,025,414

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

	Nine Months Ended September 30,
	2015		2014
Supplemental Disclosures of Cash Flow Information:
Interest paid, net of amounts capitalized of $134,943 and $0 for the nine months ended September 30, 2015 and 2014, respectively	$	27,511,861	$	26,532,866
Supplemental Disclosure of Noncash Transactions:
Application of escrow deposits to acquire real estate	$	—	$	2,300,400
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	78	$	19,680,873
Issuance of restricted common stock to settle liability	$	—	$	5,000,000
Increase in redeemable common stock, net	$	—	$	(16,256,258	)
Increase in redeemable common stock payable	$	4,267,538	$	233,880
Increase in accounts payable and accrued liabilities from additions to real estate investments	$	495,544	$	—

See accompanying condensed notes to consolidated financial statements.

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

1. Organization and Business

Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009 as a Maryland corporation that has elected to be treated as, and currently qualifies as, a real estate investment trust (“REIT”). On June 12, 2009, the Company was initially capitalized pursuant to the sale of 22,223 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $9.00 per share for an aggregate purchase price of $200,007. On July 10, 2009, Steadfast Income Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 6.

Substantially all of the Company’s business is conducted through Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. As the Company accepted subscriptions for shares of its common stock in the Public Offering (as defined below), the Company transferred substantially all of the net offering proceeds to the Operating Partnership in exchange for partnership interests, and the Company’s percentage ownership in the Operating Partnership increased proportionately. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.

As of September 30, 2015, the Company owned 65 multifamily properties comprising a total of 16,622 apartment homes and an additional 25,973 square feet of rentable commercial space at three properties.

Private Offering

On October 13, 2009, the Company commenced a private offering of up to $94,000,000 in shares of the Company’s common stock at a purchase price of $9.40 per share (with discounts available for certain categories of purchasers) (the “Private Offering”). The Company offered its shares of common stock for sale in the Private Offering pursuant to a confidential private placement memorandum and only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. On July 9, 2010, the Company terminated the Private Offering and on July 19, 2010, the Company commenced its registered public offering described below. The Company sold 637,279 shares of common stock in the Private Offering for gross offering proceeds of $5,844,325.

Public Offering

On July 23, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share. The SEC declared the Company’s registration statement effective on July 9, 2010. The Company commenced the Public Offering on July 19, 2010. The Company could reallocate shares of common stock registered in the Public Offering between the Primary Offering and the DRP.

On July 12, 2012, the Company’s board of directors determined an estimated value per share of the Company’s common stock as of March 31, 2012 of $10.24. As a result of the determination of the estimated value per share of the Company’s common stock as of March 31, 2012, effective September 10, 2012, the offering price of the Company’s common stock to the public in the Primary Offering increased from the previous price of $10.00 per share to $10.24 per share. Additionally, effective September 10, 2012, the price of shares of the Company’s common stock issued pursuant to the DRP increased from a price of

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

$9.50 per share to a price of $9.73 per share, or 95% of the new Primary Offering price of $10.24 per share. Effective September 10, 2012, the Company’s board of directors increased the amount of distributions paid on each share of the Company’s common stock from $0.001917 per share per day to $0.001964 per share per day, which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on the then new offering price of $10.24 per share.

On March 10, 2015, the Company’s board of directors determined a new estimated value per share of the Company’s common stock of $10.35 as of December 31, 2014.

The Company terminated its Public Offering on December 20, 2013. Following termination of the Public Offering, the Company continued to offer shares of common stock pursuant to the DRP until the Company’s board of directors suspended the DRP effective December 1, 2014. Through December 20, 2013, the Company sold 73,608,337 shares of common stock in the Public Offering for gross proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to the DRP for gross offering proceeds of $15,397,232.

The business of the Company is externally managed by the Advisor pursuant to an Advisory Agreement by and among the Company, the Operating Partnership and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on November 15, 2016. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Company, served as the dealer manager for the Public Offering. The Dealer Manager was responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation, rather than as a partnership.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2014. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2015.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These reclassifications have not changed the results of operations of prior periods.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements - These derivatives did not qualify as fair value hedges and are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in deferred financing costs and other assets, net in the accompanying consolidated balance sheets.

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2015
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	366,639	$	—
	December 31, 2014
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,978,939	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The Company considers the carrying value of the revolving line of credit to approximate fair value based on time to maturity. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts.

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2015 and December 31, 2014, the fair value of the mortgage notes payable was $1,108,301,616 and $1,082,414,832, respectively, compared to the carrying value of $1,098,940,967 and $1,070,757,025, respectively. The Company has determined that its mortgage notes payable are classified as Level 3 within the fair value hierarchy.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Distribution Policy

The Company has elected to be taxed as a REIT and to operate as a REIT beginning with its taxable year ending December 31, 2010. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions were based on daily record dates and calculated at a rate of $0.001964 per share per day. Each day during the period from January 1, 2015 through September 30, 2015 was a record date for distributions.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2015, the Company declared distributions of $0.181 and $0.537 per common share, respectively. During the three and nine months ended September 30, 2014, the Company declared distributions of $0.181 and $0.537 per common share, respectively.

Per Share Data

Basic earnings (loss) per share attributable for all periods presented are computed by dividing net income (loss) attributable to controlling interest by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share are computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assumes each share was issued and outstanding each day during the period. The Company’s unvested shares of restricted common stock contain non-forfeitable rights to dividends and are considered to be participating securities in accordance with GAAP and, therefore, are included in the computation of earnings (loss) per share under the two-class method. Under the two-class method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The unvested shares of restricted common stock are not allocated losses as the awards do not have a contractual obligation to share in the losses of the Company. The two-class method is an earnings (loss) allocation formula that determines earnings (loss) per share for each class of common shares and participating securities according to dividends declared and participation rights in undistributed earnings.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

RecentlyIssued Accounting Standards Updates

In May 2014, the FASB issued Accounting Standard Updates (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. The new guidance does not apply to lease contracts within the scope of Leases (Topic 840). In July 2015, the FASB decided to delay the effective date of the new guidance by one year, which will result in the new guidance being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is still evaluating the impact of adopting the new guidance on its financial statements, but does not expect the adoption to have a material impact on its financial statements.

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. Until now, the requirement to perform a going concern evaluation existed only in auditing standards. The new guidance requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. The standard states substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The guidance is effective for annual periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.

In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, that eliminates the concept of the extraordinary items from GAAP. The objective of the new guidance is to simplify the income statement presentation requirements of GAAP by altogether removing the concept of extraordinary items from consideration. The guidance is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.

In February 2015, the FASB issued ASU 2015-02, Consolidation, that provides amendments to the consolidation analysis. The amendments in this new guidance affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The guidance is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, as amended in August 2015 by ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, that will require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The FASB will permit debt issuance costs related to line-of-credit arrangements to be deferred and presented as an asset and subsequently amortized over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.The recognition and measurement guidance for debt issuance costs will not be affected by the new guidance. The guidance requires retrospective application and is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from deferred financing costs and other assets, net to mortgage notes payable on the consolidated balance sheet.

3. Real Estate

As of September 30, 2015, the Company owned 65 multifamily properties, encompassing in the aggregate 16,622 residential apartment homes and 25,973 square feet of rentable commercial space. The total cost of the Company’s real estate portfolio was $1,624,892,557. As of September 30, 2015 and December 31, 2014, the Company’s portfolio was approximately 94.9% and 94.1% occupied and the average monthly rent was $998 and $966, respectively.

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

As of September 30, 2015 and December 31, 2014, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	September 30, 2015
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs		Other Intangible Assets			Construction-in-Progress		Total Real Estate
Investments in real estate	$	174,102,422	$	1,482,832,620		$	—	$	2,644,263		$	708,925	$	1,660,288,230
Less: Accumulated depreciation and amortization	—		(146,295,880		)	—		(354,572		)	—		(146,650,452		)
Net investments in real estate and related lease intangibles	$	174,102,422	$	1,336,536,740		$	—	$	2,289,691		$	708,925	$	1,513,637,778

	December 31, 2014
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Other Intangible Assets			Construction-in-Progress		Total Real Estate
Investments in real estate	$	174,102,422	$	1,457,633,918		$	524,712		$	2,644,263		$	2,048,098	$	1,636,953,413
Less: Accumulated depreciation and amortization	—		(97,793,830		)	(308,926		)	(239,696		)	—		(98,342,452		)
Net investments in real estate and related lease intangibles	$	174,102,422	$	1,359,840,088		$	215,786		$	2,404,567		$	2,048,098	$	1,538,610,961

Depreciation and amortization expenses were $16,496,386 and $48,832,712 for the three and nine months ended September 30, 2015, and $15,975,228 and $53,637,688 for the three and nine months ended September 30, 2014, respectively.

Depreciation of the Company’s buildings and improvements were $16,458,094 and $48,502,050 for the three and nine months ended September 30, 2015, and $15,035,916 and $43,476,249 for the three and nine months ended September 30, 2014, respectively.

Amortization of the Company’s tenant origination and absorption costs was $0 and $215,786 for the three and nine months ended September 30, 2015, and $901,020 and $10,046,563 for the three and nine months ended September 30, 2014, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year. At September 30, 2015, all tenant origination and absorption costs were fully amortized and written off.

Amortization of the Company’s other intangible assets was $38,292 and $114,876 for the three and nine months ended September 30, 2015, and $38,292 and $114,876 for the three and nine months ended September 30, 2014, respectively.

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

The future amortization of the Company’s acquired other intangible assets as of September 30, 2015 and thereafter is as follows:

October 1 through December 31, 2015	$	38,292
2016	153,168
2017	153,168
2018	153,168
2019	153,168
Thereafter	1,638,727
	$	2,289,691

Operating Leases

As of September 30, 2015, the Company’s real estate portfolio comprised 16,622 residential apartment homes and was 96.3% leased by a diverse group of residents. For each of the three and nine months ended September 30, 2015 and 2014, the Company’s real estate portfolio earned approximately 99% of its rental income from residential tenants and approximately 1% of its rental income from commercial tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 months or less. The commercial office tenant leases consist of lease durations varying from 2.42 to 4.09 years.

Some residential and commercial leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit for commercial tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $4,647,452 and $4,156,797 as of September 30, 2015 and December 31, 2014, respectively.

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial office tenants as of September 30, 2015 and thereafter is as follows:

October 1 through December 31, 2015	$	63,051
2016	252,848
2017	254,800
2018	100,416
2019	58,760
	$	729,875

As of September 30, 2015 and December 31, 2014, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

4. Deferred Financing Costs and Other Assets

As of September 30, 2015 and December 31, 2014, deferred financing costs and other assets, net of accumulated amortization, consisted of:

	September 30, 2015			December 31, 2014
Deferred financing costs	$	10,338,878		$	9,743,277
Less: accumulated amortization	(3,619,707		)	(2,510,317		)
	6,719,171			7,232,960
Prepaid expenses	2,509,812			2,900,609
Interest rate cap agreements	366,639			1,978,939
Deposits	1,299,193			1,343,098
	$	10,894,815		$	13,455,606

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable secured by real property as of September 30, 2015 and December 31, 2014:

	September 30, 2015
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum				Principal Outstanding
Mortgage notes payable - fixed(1)	37	10/1/2017 - 1/1/2053	3.31	%	5.94	%	4.32	%	$	481,763,782
Mortgage notes payable - variable(2)	28	5/16/2017 - 10/1/2025	1-Mo LIBOR + 1.62%		1-Mo LIBOR + 2.75%		2.54	%	617,177,185
Total mortgage notes payable	65						3.32	%	$	1,098,940,967

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

	December 31, 2014
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum				Principal Outstanding
Mortgage notes payable - fixed(1)	37	10/1/2017 - 1/1/2053	3.31	%	5.94	%	4.30	%	$	481,090,989
Mortgage notes payable - variable(2)	27	5/16/2017 - 8/1/2024	1-Mo LIBOR + 1.62%		1-Mo LIBOR + 2.75%		2.53	%	589,666,036
Total mortgage notes payable	64						3.33	%	$	1,070,757,025

_____________________________

(1) The following table summarizes the debt premiums and discounts as of September 30, 2015, including the unamortized portion included in the principal balance as well as amounts amortized as an offset to interest expense in the accompanying consolidated statements of operations:

Unamortized Portion of Net Debt Premium as of September 30, 2015		Amortization of Net Debt Premium During the
		Three Months Ended September 30,				Nine Months Ended September 30,
		2015		2014		2015		2014
$	3,760,702	$	308,698	$	308,698	$	926,094	$	926,095

(2) See Note 11 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

Revolving Credit Facility

The Company entered into a revolving credit facility with PNC Bank, N.A. (“PNC Bank”) to borrow up to $20,000,000. Each advance under the facility is due within 180 days from the date of the advance. On July 18, 2014, the Company and PNC Bank amended the revolving credit facility to, among other things, increase the potential borrowing limit from $20,000,000 to $35,000,000. The amended and restated credit facility consists of a Tranche A and a Tranche B, and provides certain security for borrowings under the credit facility. The maximum amount that may be borrowed under Tranche A and Tranche B are $20,000,000 and $15,000,000, respectively. The amended and restated credit facility has a maturity date of July 17, 2016, subject to extension.

For each advance prior to the July 18, 2014 amendment, the Company had the option to select the interest rate from the following options: (1) 2.0% plus the highest of (A) the Prime Rate (as defined in the revolving credit facility), (B) the sum of the Federal Funds Rate (as defined in the revolving credit facility) plus 0.5%, and (C) daily LIBOR plus 1.0% or (2) LIBOR plus 3.0%. For each advance wherein one of the LIBOR options was selected by the Company, the Company could select either the one-month LIBOR, three-month LIBOR or six-month LIBOR. For each advance under the amended and restated credit facility, the Company has the option to select the interest rate from the following options: (1) Base Rate Option (as defined in the amended and restated credit facility) plus (i) with respect to Tranche A, 0.75% and (ii) with respect to Tranche B, 2.0%; or (2) LIBOR Option, which is a rate per annum fixed for the LIBOR Interest Period (as defined in the amended and restated credit facility) equal to the sum of LIBOR plus (i) with respect to Tranche A, 1.6% and (ii) with respect to Tranche B, 3.0%. The Company elected for each draw to date the LIBOR Option and the in-place interest rate was 1.80% as of September 30, 2015.

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

As of September 30, 2015 and December 31, 2014, $20,000,000 and $14,000,000 was outstanding under the credit facility, respectively.

The following is a summary of the Company’s aggregate maturities as of September 30, 2015:

			Remainder of 2015		Maturities During the Years Ending December 31,
Contractual Obligation	Total				2016		2017		2018		2019		Thereafter
Principal payments on outstanding debt obligations(1)	$	1,115,180,265	$	4,907,096	$	36,947,806	$	52,735,426	$	84,241,553	$	128,737,835	$	807,610,549

_____________________________

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the debt premiums associated with certain notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. As of September 30, 2015 and December 31, 2014, the Company was in compliance with all financial debt covenants.

For the three and nine months ended September 30, 2015, the Company incurred interest expense of $10,053,781 and $29,662,052, respectively. Interest expense for the three and nine months ended September 30, 2015 includes amortization of deferred financing costs of $451,270 and $1,183,398, amortization of loan premiums of $308,698 and $926,094, net unrealized loss from the change in fair value of interest rate cap agreements of $540,376 and $1,908,550 and capitalized interest of $34,268 and $134,943, respectively. The capitalized interest is included in real estate on the consolidated balance sheets.

For the three and nine months ended September 30, 2014, the Company incurred interest expense of $9,095,277 and $30,292,922, respectively. Interest expense for the three and nine months ended September 30, 2014 includes amortization of deferred financing costs of $356,430 and $1,115,818, amortization of loan premiums of $308,698 and $926,095 and net unrealized loss from the change in fair value of interest rate cap agreements of $46,544 and $3,362,058, respectively.

Interest expense of $2,719,774 and $2,870,380 was payable as of September 30, 2015 and December 31, 2014, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

Under the Company’s Third Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares designated as preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

During 2009, the Company issued 22,223 shares of common stock to the Sponsor for $200,007. As of September 30, 2015, the Company had issued 76,732,395 shares of common stock in its Private Offering and Public Offering for offering proceeds of $679,572,220, net of offering costs of $95,845,468, including 4,073,759 shares of common stock pursuant to the DRP for total proceeds of $39,580,847. Offering costs primarily consist of selling commissions and dealer manager fees. The Company terminated its Public Offering on December 20, 2013, but continued to offer shares pursuant to the DRP through November 30, 2014.

The issuance and vesting activity for the nine months ended September 30, 2015 and for the years ended December 31, 2014 and 2013 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with their initial election or re-election to the board of directors at the Company’s annual meeting, upon their departure from the board of directors, or in appreciation of their service and commitment to the Company is as follows:

	For the Nine Months Ended September 30, 2015		For the Years Ended December 31,
			2014		2013
Nonvested shares at the beginning of the period	16,875		18,750		20,625
Granted shares	14,000		10,000		10,000
Vested shares	(18,375	)	(11,875	)	(11,875	)
Nonvested shares at the end of the period	12,500		16,875		18,750

Additionally, the weighted average fair value of restricted stock issued to the Company’s independent directors for the nine months ended September 30, 2015 and for the years ended December 31, 2014 and 2013 is as follows:

Grant Year	Weighted Average Fair Value
2013	$	10.24
2014	10.24
2015	10.35

The shares of restricted common stock vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan, as defined below.

Included in general and administrative expenses is $125,719 and $171,486 for the three and nine months ended September 30, 2015 and $50,186 and $94,538 for the three and nine months ended September 30, 2014, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock is 1.69 years as of September 30, 2015.

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share in satisfaction of certain deferred fees due to the Advisor in the aggregate amount of $5,000,000. The shares of restricted stock vest and become non-forfeitable upon the earliest to occur of (i) 50% at December 31, 2015 and 50% at December 31, 2016, (ii) certain liquidity events of the Company, (iii) the Company’s cumulative modified funds from operations exceed the lesser of (a) the cumulative amount of distributions paid to the Company’s stockholders or (b) an amount that is equal to a 7.0% cumulative,

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

non-compounded annual return on the Company’s stockholders’ invested capital, or (iv) the Company’s termination of, or failure to renew, the Advisory Agreement other than for “cause” (as defined in the Advisory Agreement). The shares of restricted stock shall be forfeited if the Advisor is terminated for any reason other than (iv) above. The fair value of the shares of restricted stock was $5,053,711 as of September 30, 2015.

Convertible Stock

The Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of the Company’s common stock if and when: (A) the Company has made total distributions on the then outstanding shares of common stock equal to the original issue price of those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event of a termination or non-renewal of the Advisory Agreement by the Company for cause, the Convertible Stock will be redeemed by the Company for $1.00.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2015 and December 31, 2014, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

In connection with the Public Offering, the Company’s board of directors approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP was $9.50. Effective September 10, 2012, in connection with the change in the Public Offering price, shares of the Company’s common stock were issued pursuant to the DRP at a price of $9.73 per share. Effective with distributions earned beginning on December 1, 2014, the Company’s board of directors elected to suspend the DRP. As a result, all distributions are currently paid in cash and not reinvested in shares of the Company’s common stock. The Company’s board of directors may, in its sole discretion, from time to time, reinstate the DRP at a price based upon the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant, although there is no assurance as to if or when this will happen.

No sales commissions or dealer manager fees were payable on shares sold through the DRP.

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

The purchase price for shares repurchased under the Company’s share repurchase program is as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

________________

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) For purposes of the share repurchase program, the “Estimated Value per Share” equals the most recently determined Estimated Value per Share.

(3) The required one year holding period to be eligible to redeem shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares redeemed upon the death or disability of a stockholder is equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter during quarters in which the share repurchase is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date. On October 21, 2014, the Company’s board of directors elected to suspend the Company’s share repurchase program, effective November 20, 2014. On May 12, 2015, the Company’s board of directors elected to reinstate the share repurchase program effective July 1, 2015.

During the three and nine months ended September 30, 2015, the Company received requests for the redemption of 422,879 shares with a total redemption value of $4,267,538. As of September 30, 2015, no redemption requests received during the three and nine months ended September 30, 2015 were redeemed. During the three and nine months ended September 30, 2014, the Company redeemed a total of 80,042 and 167,970 shares with a total redemption value of $776,102 and $1,632,018 and

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

received requests for the redemption of 48,927 and 186,533 shares with a total redemption value of $484,154 and $1,830,449, respectively, all of which were redeemed during the year ended December 31, 2014.

As of September 30, 2015, the Company had 422,879 shares of outstanding and unfulfilled redemption requests and recorded $4,267,538 in accounts payable and accrued liabilities on the accompanying consolidated balance sheet related to these unfulfilled redemption requests. The Company redeemed 197,989 shares of the outstanding redemption requests as of September 30, 2015 totaling $2,000,000 on the October 30, 2015 redemption date.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests would be honored among all requests for redemptions in any given redemption period as follows: first, pro rata as to redemptions sought upon a stockholder’s death or disability; and, next, pro rata as to other redemption requests.

The Company is not obligated to repurchase shares of the Company’s common stock under the share repurchase program. In no event shall redemptions under the share repurchase program exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year. There is no fee in connection with a repurchase of shares of the Company’s common stock.

Effective July 1, 2015 with the reinstatement of the share repurchase program, in no event shall the value of the shares repurchased pursuant to the share repurchase program exceed $2,000,000 during the quarter beginning July 1, 2015, with each subsequent quarter not to exceed $1,000,000. There is no fee in connection with a repurchase of shares of the Company’s common stock.

In addition, the Company’s board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time upon 30 days’ notice to the Company’s stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders.

Pursuant to the share repurchase program, for the three and nine months ended September 30, 2014, the Company reclassified $5,966,982 and $16,256,258, net of $776,102 and $1,632,018 of fulfilled redemption requests, respectively, from permanent equity to temporary equity.

Distributions

The Company’s long-term policy is to pay distributions from cash flow from operations. However, in order to provide additional available funds to pay distributions, the Company’s obligation to pay up to $5,000,000 of fees due to the Advisor pursuant to the Advisory Agreement was deferred. On June 11, 2014, the Company issued $5,000,000 in restricted shares of common stock to the Advisor, subject to certain vesting requirements, as disclosed above, to settle the previously deferred fees due to the Advisor. As of September 30, 2015 and December 31, 2014, no fees had been deferred pursuant to the Advisory Agreement.

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Distributions Declared

Distributions declared to date (1) accrue daily to stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001964 per share per day, which if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock.

Distributions declared for the three and nine months ended September 30, 2015 were $13,888,802 and $41,210,771, including $0 and $78, or 0 and 8 shares of common stock, respectively, attributable to the DRP.

Distributions declared for the three and nine months ended September 30, 2014 were $13,785,040 and $40,413,978, including $6,763,224 and $19,934,690, or 695,090 and 2,048,786 shares of common stock, respectively, attributable to the DRP.

As of September 30, 2015 and December 31, 2014, $4,529,332 and $4,679,455 in distributions declared were payable, none of which were reinvested pursuant to the DRP.

Distributions Paid

For the three and nine months ended September 30, 2015, the Company paid cash distributions of $13,887,973 and $41,360,816, which related to distributions declared for each day in the period from June 1, 2015 through August 31, 2015 and December 1, 2014 through August 31, 2015, respectively. Additionally, for the three and nine months ended September 30, 2015, 0 and 8 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $0 and $78, respectively. For the three and nine months ended September 30, 2015, the Company paid total distributions of $13,887,973 and $41,360,894.

For the three and nine months ended September 30, 2014, the Company paid cash distributions of $6,993,862 and $20,284,125, which related to distributions declared for each day in the period from June 1, 2014 through August 31, 2014 and December 1, 2013 through August 31, 2014, respectively. Additionally, for the three and nine months ended September 30, 2014, 693,100 and 2,022,701 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $6,743,864 and $19,680,873, respectively. For the three and nine months ended September 30, 2014, the Company paid total distributions of $13,737,726 and $39,964,998.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

7. Earnings (Loss) Per Share

The following table presents a reconciliation of net loss attributable to common stockholders and shares used in calculating basic and diluted earnings (loss) per share, or EPS, for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net loss attributable to the Company	$	(3,603,728	)	$	(3,337,573	)	$	(10,338,802	)	$	(21,074,163	)
Less: dividends declared on participating securities	90,485			91,681			268,505			110,811
Net loss attributable to common stockholders	(3,694,213		)	(3,429,254		)	(10,607,307		)	(21,184,974		)
Weighted average common shares outstanding — basic and diluted	76,370,121			75,792,897			76,371,860			75,151,322
Loss per common share — basic and diluted	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.28	)

The Company excluded all unvested restricted common shares outstanding issued to the Advisor and the Company’s independent directors from the calculation of diluted loss per common share as the effect would have been antidilutive.

8. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor. Pursuant to the Advisory Agreement, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, and the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2015 and 2014 and amounts outstanding to the Advisor and its affiliates as of September 30, 2015 and December 31, 2014 are as follows:

	Incurred For the				Incurred For the
	Three Months Ended September 30,				Nine Months Ended September 30,				Payable as of
	2015		2014		2015		2014		September 30, 2015		December 31, 2014
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	3,473,724	$	3,353,069	$	10,370,441	$	9,844,858	$	40,591	$	1,155,012
Acquisition fees(1)	187,735		372,778		187,735		2,869,680		187,735		603,400
Acquisition expenses(2)	—		115,172		7,145		526,321		—		4,002
Property management
Fees(1)	1,570,816		1,484,356		4,621,570		4,301,762		528,376		501,540
Reimbursement of onsite personnel(3)	5,003,907		4,687,564		14,079,041		13,261,284		983,261		583,161
Other fees(1)	427,791		393,538		1,262,163		1,216,888		52,339		76,913
Other operating expenses(4)	292,300		204,653		1,046,087		687,456		104,584		72,253
Disposition fees(5)	—		225,375		—		463,688		—		—
Consolidated Balance Sheets:
Capitalized to real estate
Construction management fees	711,056		486,405		1,283,818		1,056,147		49,204		43,209
	$	11,667,329	$	11,322,910	$	32,858,000	$	34,228,084	$	1,946,090	$	3,039,490

_____________________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

(2) Included in acquisition costs in the accompanying consolidated statements of operations.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(4) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(5) Included in gain on sale of real estate, net in the accompanying consolidated statements of operations.

Organization and Offering Costs

The Company terminated the Public Offering on December 20, 2013. Prior to the termination of the Public Offering, organization and offering costs (other than selling commissions and dealer manager fees) of the Company were initially paid by the Advisor or its affiliates on behalf of the Company. These organization and other offering costs include all expenses to be paid by the Company in connection with the Public Offering and the Private Offering, including legal, accounting, printing,

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

mailing and filing fees, charges of the Company’s transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with the Public Offering and the Private Offering. Reimbursement of expenses paid to the Advisor did not exceed the actual expenses incurred by the Advisor. Organization costs included all expenses incurred by the Company in connection with the formation of the Company, including, but not limited to, legal fees and other costs to incorporate the Company.

Included in organization and offering costs are payments made to Crossroads Capital Advisors, LLC (“Crossroads”), an affiliate of the Sponsor, for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; assisting in public relations activities and the administration of the DRP and share repurchase program; and providing advice as to our real estate portfolio and property operations.

Pursuant to the Advisory Agreement, the Company was obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company in connection with the Public Offering, provided that the Advisor was obligated to reimburse the Company to the extent selling commissions, dealer manager fees and organization and offering costs incurred by the Company in the Public Offering exceeded 15% of gross offering proceeds raised in the completed Public Offering. No amounts were owed to the Company by the Advisor pursuant to the Advisory Agreement.

Organization costs were expensed as incurred. From inception through September 30, 2015, the Advisor incurred $100,738 of organizational costs on the Company’s behalf, of which $100,738 was reimbursed to the Advisor. No organizational costs were incurred or recognized during the three and nine months ended September 30, 2015 and 2014.

Offering costs, including selling commissions and dealer manager fees, were deferred and charged to stockholders’ equity as such amounts were reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds. For each of the three and nine months ended September 30, 2015 and 2014, no amounts were reimbursed to the Advisor as the Public Offering terminated on December 20, 2013.

The Company has reimbursed the Advisor $95,946,206 for organization and offering costs incurred from inception through September 30, 2015, including reimbursements of organization costs of $100,738, reimbursements of Private Offering costs of $2,301,719 and reimbursements of Public Offering costs of $93,543,749.

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal to one-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. Such fee is calculated including acquisition fees, acquisition expenses and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the acquisition or origination of any type of real property or real estate-related asset acquired directly by the Company or (2) the Company’s allocable portion of the purchase price in connection with the acquisition or origination of any type of real property or real estate-related asset acquired through a joint venture, including any acquisition and origination expenses and any debt attributable to such investments.

In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor or its affiliates, including personnel-related costs for acquisition due diligence, legal and non-recurring management services, and amounts the Advisor pays to third parties in connection with the selection, acquisition or development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the acquisition of each of the Company’s properties (other than EBT Lofts, Library Lofts and Stuart Hall Lofts, which are managed by an unaffiliated third-party management company). The property management fee payable with respect to each property under the Property Management Agreements (each a “Property Management Agreement”) ranges from 2.50% to 3.75% of the annual gross revenue collected, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. The Property Manager also receives an oversight fee of 1% of gross revenues at certain of the properties at which it does not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and continues thereafter on a month-to-month basis unless either party gives a 60 day prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time without cause or upon an uncured breach of the Property Management Agreement upon 30 days prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, and support and training services. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees.

Construction Management Fees

The Company has entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with planned capital improvements and renovation for certain of the Company’s properties. The construction management fee payable with respect to each property under the Construction Management Agreements (each a “Construction Management Agreement”) ranges from 5.0% to 12.0% of the

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement has a term equal to the planned renovation timeline unless either party gives a 30 day prior notice of its desire to terminate the Construction Management Agreement. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes while they undergo the planned renovation.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead and investment management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

At September 30, 2015, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation test.

Disposition Fee

If the Advisor or its affiliates provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of a property or real estate-related asset, the Company will pay the Advisor or its affiliates 1.5% of the sales price of each property or real estate-related asset sold. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

registered broker-dealer. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser of one-half of the brokerage commission paid or 3% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to the Advisor, exceed 6% of the contract sales price. Refer to Note 12 Subsequent Events for additional information.

Restricted Stock Agreement

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share in satisfaction of certain deferred fees due to the Advisor in the aggregate amount of $5,000,000. The shares of restricted stock vest and become non-forfeitable upon the earliest to occur of (i) 50% at December 31, 2015 and 50% at December 31, 2016, (ii) certain liquidity events of the Company, (iii) the Company’s cumulative modified funds from operations exceed the lesser of (a) the cumulative amount of distributions paid to the Company’s stockholders or (b) an amount that is equal to a 7.0% cumulative, non-compounded annual return on the Company’s stockholders’ invested capital, or (iv) the Company’s termination of, or failure to renew, the Advisory Agreement other than for “cause” (as defined in the Advisory Agreement). The shares of restricted stock shall be forfeited if the Advisor is terminated for any reason other than (iv) above.

9. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of September 30, 2015 and December 31, 2014, except those awards granted to the independent directors as described below.

Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the Company’s full board of directors. The Company’s board of directors, and each of the independent directors, agreed to delay the initial grant of restricted stock until the Company raised $2,000,000 in gross offering proceeds in the Private Offering. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 2,500 shares of restricted common stock. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan. On August 10, 2015, the Company’s board of directors granted 2,000 shares of restricted common stock pursuant to the Incentive Award Plan to each of Larry H. Dale and Kerry D. Vandell in appreciation of their service as independent directors and commitment to the Company for their prior years of service as independent directors, all of which vested immediately. The Company recorded stock-based compensation expense of $125,719 and $171,486 for the three and nine months ended September 30, 2015 and $50,186 and $94,538 for the three and nine months ended September 30, 2014, respectively.

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

10. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Houston, Texas, Chicago, Illinois and Austin, Texas apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

11. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2015 and December 31, 2014:

September 30, 2015
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate		Weighted Average Rate Cap		Fair Value
Interest rate cap	11/1/2016 - 10/1/2019	One-Month LIBOR	28	$	610,485,000	0.19	%	2.62	%	$	366,639

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(unaudited)

December 31, 2014
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate		Weighted Average Rate Cap		Fair Value
Interest rate cap	11/1/2016 - 10/1/2019	One-Month LIBOR	27	$	577,961,000	0.17	%	2.38	%	$	1,978,939

The interest rate cap agreements are not designated as cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2015 resulted in an unrealized loss of $540,376 and $1,908,550, respectively, which is included in interest expense in the accompanying consolidated statements of operations. The fair value of the interest rate cap agreements of $366,639 and $1,978,939 as of September 30, 2015 and December 31, 2014, respectively, are included in deferred financing costs and other assets, net on the accompanying consolidated balance sheets.

12. Subsequent Events

Distributions Paid

On October 1, 2015, the Company paid distributions of $4,529,332, which related to distributions declared for each day in the period from September 1, 2015 through September 30, 2015. All such distributions were paid in cash.

On November 2, 2015, the Company paid distributions of $4,679,530, which related to distributions declared for each day in the period from October 1, 2015 through October 31, 2015. All such distributions were paid in cash.

Redemption

On October 30, 2015, the Company redeemed 197,989 shares of its common stock for a total redemption value of $2,000,000, or $10.10 per share, pursuant to the Company’s share repurchase program.

Advisory Agreement

On November 10, 2015, the Company entered into Amendment No. 8 (the “Amendment”) to the Amended and Restated Advisory Agreement, by and among the Company, the Operating Partnership and the Advisor. The amendment (i) modified the terms of the disposition fee payable to the Advisor or its affiliates pursuant to Section 9(c) of the Advisory Agreement and (ii) renewed the Advisory Agreement for a term beginning November 15, 2015 and ending on November 15, 2016.

30

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Steadfast Income REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Income REIT, Inc., a Maryland corporation, and, as required by context, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have had a net loss for each quarterly and annual period since inception;

• changes in economic conditions generally and the real estate and debt markets specifically;

• our ability to successfully dispose of real estate on terms that are favorable to us;

• risks inherent in the real estate business, including tenant defaults, tenant vacancies, potential liability relating to environmental matters and liquidity of real estate investments;

• the fact we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed on any forward-looking statements included herein. All forward-looking statements are made as of the date this quarterly report is filed with the Securities and Exchange Commission, or SEC, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made herein, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this quarterly report, the inclusion of such

31

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this quarterly report will be achieved.

All forward-looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 19, 2015.

Overview

We were formed on May 4, 2009, as a Maryland corporation that has elected to qualify as a real estate investment trust, or REIT. As described in more detail below, we own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States.

On July 19, 2010, we commenced our initial public offering of up to a maximum of 150,000,000 shares of common stock at an initial price of $10.00 per share (subject to certain discounts) and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $9.50 per share. On July 12, 2012, our board of directors determined an estimated value per share of our common stock of $10.24 as of March 31, 2012. As a result of the determination of the estimated value per share of our common stock as of March 31, 2012, effective September 10, 2012, the offering price of our common stock in our ongoing public offering increased from the previous price of $10.00 per share to $10.24 per share. Additionally, effective September 10, 2012, the price of shares of our common stock issued pursuant to our distribution reinvestment plan increased from a price of $9.50 per share to a price of $9.73 per share, or 95% of the new offering price of $10.24 per share.

On December 20, 2013, we terminated our ongoing public offering. Upon termination of our public offering, we had sold 73,608,337 shares of common stock for gross proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $15,397,232. On January 3, 2014, we registered with the SEC to offer up to 12,000,000 shares of common stock to existing stockholders pursuant to our distribution reinvestment plan. Our board of directors may, in its sole discretion, change the price at which we offer shares of common stock to our stockholders pursuant to the distribution reinvestment plan to reflect future changes in our estimated value per share and other factors that our board of directors deems relevant. On October 21, 2014, our board of directors elected to suspend our DRP, effective December 1, 2014. On March 10, 2015, our board of directors determined an estimated value per share of our common stock of $10.35 as of December 31, 2014.

As of September 30, 2015, we owned 65 multifamily properties located within the greater midwest and southern geographic regions of the United States. Our property portfolio consists of an aggregate of 16,622 apartment homes and 25,973 square feet of rentable commercial space. The cost of our real estate portfolio was $1,624,892,557, exclusive of closing costs. At September 30, 2015, our portfolio was approximately 96.3% leased.

Steadfast Income Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

32

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Substantially all of our business is conducted through our operating partnership. We are the sole general partner of our operating partnership. The initial limited partner of our operating partnership is our advisor. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating real properties, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We have elected to be taxed as a REIT for federal income tax purposes beginning with the taxable year ending December 31, 2010. As a REIT, we generally are not subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.  

33

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our Real Estate Portfolio

As of September 30, 2015, we owned the 65 multifamily properties listed below:

				Number of Units	Contract Purchase Price		Mortgage Debt Outstanding at September 30, 2015		Average Occupancy(1) as of				Average Monthly Rent(2) as of
	Property Name	Location	Purchase Date						Sep 30, 2015		Dec 31, 2014		Sep 30, 2015		Dec 31, 2014
1	Park Place Condominiums	Des Moines, IA	12/22/2010	151	$	8,323,400	$	4,816,095	92.7	%	86.1	%	$	892	$	813
2	Clarion Park Apartments	Olathe, KS	6/28/2011	220	11,215,000		8,359,992		96.4	%	97.7	%	754		753
3	Cooper Creek Village Apartments	Louisville, KY	8/24/2011	123	10,420,000		6,404,924		95.9	%	94.3	%	906		913
4	Truman Farm Villas	Grandview, MO	12/22/2011	200	9,100,000		5,625,350		98.5	%	98.0	%	687		679
5	EBT Lofts	Kansas City, MO	12/30/2011	102	8,575,000		5,318,191		92.2	%	95.1	%	984		924
6	Windsor on the River Apartments	Cedar Rapids, IA	1/26/2012	424	33,000,000		23,390,829		93.9	%	94.8	%	699		686
7	Renaissance at St. Andrews	Louisville, KY	2/17/2012	216	12,500,000		8,814,642		93.5	%	97.7	%	677		658
8	Spring Creek Edmond Apartments	Edmond, OK	3/9/2012	252	19,350,000		13,319,479		97.2	%	96.0	%	888		847
9	Montclair Parc Apartment Homes	Oklahoma City, OK	4/26/2012	360	35,750,000		23,456,701		92.8	%	96.7	%	877		866
10	Sonoma Grande Apartments	Tulsa, OK	5/24/2012	336	32,200,000		21,993,863		95.8	%	95.2	%	952		953
11	Estancia Apartments	Tulsa, OK	6/29/2012	294	27,900,000		21,216,200		92.9	%	95.9	%	993		961
12	Montelena Apartments	Round Rock, TX	7/13/2012	232	18,350,000		12,042,383		96.1	%	94.8	%	1,087		1,003
13	Valley Farms Apartment Homes	Louisville, KY	8/30/2012	160	15,100,000		9,931,782		92.5	%	97.5	%	844		845
14	Hilliard Park Apartments	Columbus, OH	9/11/2012	201	19,800,000		13,366,229		95.5	%	97.0	%	1,015		999
15	Sycamore Terrace Apartments	Terre Haute, IN	9/20/2012 & 3/5/2014	250	23,174,157		18,000,000		96.8	%	94.8	%	1,117		1,151
16	Hilliard Summit Apartments	Columbus, OH	9/28/2012	208	24,100,000		16,195,024		94.7	%	90.9	%	1,113		1,080
17	Springmarc Apartments	San Marcos, TX	10/19/2012	240	21,850,000		14,949,283		95.8	%	92.5	%	946		878
18	Renaissance at St. Andrews Condominiums	Louisville, KY	10/31/2012	29	1,375,000		—		100.0	%	96.6	%	709		650
19	Ashley Oaks Apartment Homes	San Antonio, TX	11/29/2012	462	30,790,000		21,008,212		95.9	%	93.3	%	792		756
20	Arrowhead Apartment Homes	Palatine, IL	11/30/2012	200	16,750,000		12,136,600		94.5	%	97.5	%	1,022		1,027
21	The Moorings Apartments	Roselle, IL	11/30/2012	216	20,250,000		14,671,793		97.2	%	95.4	%	1,091		1,022
22	Forty 57 Apartments	Lexington, KY	12/20/2012	436	52,500,000		38,041,281		94.5	%	95.0	%	867		836

34

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

				Number of Units	Contract Purchase Price		Mortgage Debt Outstanding at September 30, 2015		Average Occupancy(1) as of				Average Monthly Rent(2) as of
	Property Name	Location	Purchase Date						Sep 30, 2015		Dec 31, 2014		Sep 30, 2015		Dec 31, 2014
23	Keystone Farms Apartments	Nashville, TN	12/28/2012	90	$	8,400,000	$	6,016,492	97.8	%	98.9	%	$	1,089	$	1,044
24	Riverford Crossing Apartments	Frankfort, KY	12/28/2012	300	30,000,000		21,641,472		95.7	%	96.7	%	843		803
25	Southpointe at Valley Farms(3)	Louisville, KY	12/28/2012	128	5,275,000		8,377,518		53.1	%	93.8	%	858		992
26	Montecito Apartments	Austin, TX	12/31/2012	268	19,000,000		13,797,551		97.8	%	95.9	%	896		855
27	Hilliard Grand Apartments	Dublin, OH	12/31/2012	314	40,500,000		28,660,426		96.2	%	96.8	%	1,248		1,217
28	The Hills at Fair Oaks	Fair Oaks Ranch, TX	1/31/2013	288	34,560,000		24,521,022		95.8	%	95.8	%	1,011		975
29	Library Lofts East	Kansas City, MO	2/28/2013	118	12,750,000		8,809,150		95.8	%	98.3	%	975		955
30	Trails at Buda Ranch	Buda, TX	3/28/2013	264	23,000,000		16,586,657		97.7	%	95.1	%	1,012		999
31	Deep Deuce at Bricktown	Oklahoma City, OK	3/28/2013	294	38,220,000		26,067,667		94.6	%	95.2	%	1,349		1,296
32	Deer Valley Apartments	Lake Bluff, IL	4/30/2013	224	28,600,000		20,351,282		94.2	%	96.4	%	1,276		1,270
33	Grayson Ridge Apartment Homes	North Richland Hills, TX	5/31/2013	240	14,300,000		10,459,980		97.1	%	92.9	%	802		750
34	Rosemont Olmos Park Apartments	San Antonio, TX	5/31/2013	144	22,050,000		14,617,968		95.8	%	93.1	%	1,234		1,239
35	Retreat at Quail North	Oklahoma City, OK	6/12/2013	240	25,250,000		16,904,059		95.4	%	97.5	%	989		956
36	Lodge at Trails Edge	Indianapolis, IN	6/18/2013	268	18,400,000		12,466,993		97.0	%	95.5	%	711		708
37	Arbors of Carrollton	Carrollton, TX	7/3/2013	131	8,800,000		6,167,368		96.2	%	96.9	%	881		824
38	Waterford on the Meadow	Plano, TX	7/3/2013	350	23,100,000		16,361,429		97.4	%	93.1	%	875		843
39	The Belmont	Grand Prairie, TX	7/26/2013	260	12,100,000		9,139,966		97.3	%	96.9	%	754		736
40	Meritage at Steiner Ranch	Austin, TX	8/6/2013	502	80,000,000		54,290,438		94.2	%	92.6	%	1,367		1,342
41	Tapestry Park Apartments	Birmingham, AL	8/13/2013 & 12/1/2014	354	50,285,000		34,725,000		95.2	%	63.6	%	1,258		1,196
42	Dawntree Apartments	Carrollton, TX	8/15/2013	400	24,000,000		15,591,965		98.5	%	94.5	%	831		773
43	Stuart Hall Lofts	Kansas City, MO	8/27/2013	115	16,850,000		12,221,897		97.4	%	93.0	%	1,244		1,213
44	BriceGrove Park Apartments	Canal Winchester, OH	8/29/2013	240	20,100,000		14,692,188		96.3	%	92.9	%	830		813
45	Retreat at Hamburg Place	Lexington, KY	9/5/2013	150	16,300,000		—		96.0	%	95.3	%	982		932
46	Cantare at Indian Lake Village	Hendersonville, TN	9/24/2013	206	29,000,000		18,850,000		96.6	%	95.1	%	1,133		1,070

35

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

				Number of Units	Contract Purchase Price		Mortgage Debt Outstanding at September 30, 2015		Average Occupancy(1) as of				Average Monthly Rent(2) as of
	Property Name	Location	Purchase Date						Sep 30, 2015		Dec 31, 2014		Sep 30, 2015		Dec 31, 2014
47	The Landing at Mansfield	Mansfield, TX	9/27/2013	336	$	30,900,000	$	22,313,991	97.3	%	93.2	%	$	966	$	918
48	Heights at 2121	Houston, TX	9/30/2013	504	37,000,000		28,449,046		94.0	%	93.1	%	944		929
49	Villas at Huffmeister	Houston, TX	10/10/2013	294	37,600,000		25,509,448		95.2	%	96.3	%	1,173		1,137
50	Villas of Kingwood	Kingwood, TX	10/10/2013	330	40,150,000		27,614,030		92.7	%	95.8	%	1,212		1,168
51	Waterford Place at Riata Ranch	Cypress, TX	10/10/2013	228	23,400,000		16,052,542		93.0	%	96.9	%	1,105		1,075
52	Carrington Place	Houston, TX	11/7/2013	324	32,900,000		22,376,000		94.4	%	94.1	%	1,051		998
53	Carrington at Champion Forest	Houston, TX	11/7/2013	284	33,000,000		22,959,000		95.8	%	96.8	%	1,102		1,051
54	Carrington Park at Huffmeister	Cypress, TX	11/7/2013	232	25,150,000		17,717,000		93.1	%	93.1	%	1,089		1,045
55	Willow Crossing Apartments	Elk Grove, IL	11/20/2013	579	58,000,000		58,024,000		95.2	%	92.4	%	1,054		974
56	Echo at Katy Ranch	Katy, TX	12/19/2013	260	35,100,000		—		89.2	%	93.1	%	1,292		1,328
57	Heritage Grand at Sienna Plantation	Missouri City, TX	12/20/2013	240	27,000,000		16,580,892		93.8	%	94.6	%	1,166		1,186
58	Audubon Park Apartments	Nashville, TN	12/27/2013	256	16,750,000		11,760,000		91.8	%	92.6	%	857		823
59	Mallard Crossing Apartments	Cincinnati, OH	12/27/2013	350	39,800,000		27,463,942		93.1	%	92.0	%	1,023		989
60	Renaissance at Carol Stream	Carol Stream, IL	12/31/2013	293	29,150,000		20,175,735		95.2	%	93.5	%	958		1,000
61	Reserve at Creekside	Chattanooga, TN	3/28/2014	192	18,875,000		—		96.4	%	94.3	%	951		909
62	Mapleshade Park	Dallas, TX	3/31/2014	148	23,325,000		15,161,000		94.6	%	89.9	%	1,495		1,462
63	Richland Falls(4)	Murfreesboro, TN	5/16/2014	190	21,000,000		13,800,000		96.3	%	96.3	%	932		860
64	Oak Crossing Apartments	Fort Wayne, IN	6/3/2014	222	24,230,000		15,762,000		95.0	%	95.9	%	995		956
65	Park Shore Apartments	St. Charles, IL	9/12/2014	160	18,350,000		12,845,000		92.5	%	95.0	%	1,144		1,113
				16,622	$	1,624,892,557	$	1,098,940,967	94.9	%	94.1	%	$	998	$	966

________________

(1) At September 30, 2015, our portfolio was approximately 96.3% leased.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Southpointe at Valley Farms was acquired by the Company on December 28, 2012, comprised of 32 apartment homes, all of which were three-bedroom apartments. During 2014, construction began on an additional 96 apartment homes, comprised of 16 one-bedroom apartments and 80 two-bedroom apartments, at Southpointe at Valley Farms. As of September 30, 2015, all 96 additional apartment homes were completed and available to be leased.

36

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(4) Richland Falls was acquired by the Company on May 16, 2014, containing 190 apartment homes. During 2015, construction began on an additional 86 apartment homes at Richland Falls, none of which were completed as of September 30, 2015.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. There have been no significant changes to our accounting policies during 2015. See also Note 2 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with the taxable year ended December 31, 2010. To maintain our qualifications as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification was lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2015 and December 31, 2014, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, we have established valuation allowances, primarily in connection with the net operating loss carryforward related to the REIT. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2014, 2013 and 2012.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash provided by operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

37

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001964 per share per day, which if paid each day over a 365-day period is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock.

The distributions paid during each of the last five fiscal quarters ended September 30, 2015, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Distributions Paid(3)						Sources of Distributions Paid						Net Cash Provided By Operating Activities
											Cash Flow From Operations		Offering Proceeds		Revolving Credit Facility
					Cash		Reinvested		Total
Third Quarter 2014	$	13,785,040	$	0.181	$	6,993,862	$	6,743,864	$	13,737,726	$	13,737,726	$	—	$	—	$	15,165,296
Fourth Quarter 2014	13,882,686		0.181		9,207,864		4,502,799		13,710,663		13,710,663		—		—		16,104,072
First Quarter 2015	13,585,679		0.177		13,585,602		78		13,585,680		11,032,049		—		2,553,631		11,032,049
Second Quarter 2015	13,736,290		0.179		13,887,241		—		13,887,241		11,382,294		—		2,504,947		11,382,294
Third Quarter 2015	13,888,802		0.181		13,887,973		—		13,887,973		13,887,973		—		—		14,287,719
	$	68,878,497	$	0.899	$	57,562,542	$	11,246,741	$	68,809,283	$	63,750,705	$	—	$	5,058,578	$	67,971,430

________________

(1) Distributions are based on daily record dates and calculated at a rate of $0.001964 per share per day.

(2) Assumes each share was issued and outstanding each day during the periods presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and nine months ended September 30, 2015, we paid aggregate distributions of $13,887,973 and $41,360,894, including $13,887,973 and $41,360,816 of distributions paid in cash and 0 and 8 in shares of our common stock issued pursuant to our distribution reinvestment plan for $0 and $78, respectively. For the three and nine months ended September 30, 2015, our net loss was $3,603,728 and $10,338,802, we had funds from operations, or FFO, of $12,892,658 and $38,493,910 and net cash provided by operations of $14,287,719 and $36,702,062, respectively. For the three and nine months ended September 30, 2015, we funded $13,887,973 and $36,302,316 of distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with net cash provided by operating activities and with proceeds from our revolving credit facility of $0 and $5,058,578, respectively. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Over the long-term, we expect that our distributions will be paid from cash flow from operations (except with respect to distributions related to sales of our real estate and real estate-related investments). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements,” and “Results of Operations” herein. In the event our cash flow from operations decreases in the future, the level of our distributions may also decrease.

Inflation

Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit tenants to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

With respect to our commercial properties, we include in our leases future provisions designed to protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. We believe that shorter term lease contracts on commercial properties lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.

As of September 30, 2015, we had not entered into any leases as a lessee.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to distribute at least 90% of our annual REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Liquidity and Capital Resources

We use, and intend to use in the future, secured and unsecured borrowings. At the conclusion of our initial public offering, our overall borrowings were approximately 65% of the cost of our investments. Going forward, we expect that our borrowings will be less than 65% of the value of our properties, as determined by an independent third party appraiser or qualified independent valuation expert. Under our Third Articles of Amendment and Restatement, or our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of September 30, 2015, our borrowings were not in excess of 300% of the value of our net assets.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor in connection with the disposal of investments, the management of our assets and costs incurred by our advisor in providing services to us.

Our principal demand for funds will be to fund value-enhancement and other capital improvement projects, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. We intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current cash balances;

• various forms of secured and unsecured financing;

• equity capital from joint venture partners;

• proceeds from our operating partnership’s private placements, if any; and

• cash from operations.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners, our ability to obtain various forms of secured and unsecured financing and proceeds from our operating partnership’s private placements, if any, will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the sources of capital noted above which we will rely on to meet our short term liquidity requirements, we may also utilize additional secured and unsecured financings and proceeds from the sale of our properties. We may also conduct additional public or private offerings. We expect these resources to be adequate to fund our operating activities, debt service and distributions, which we presently anticipate will grow over time, and will be sufficient to fund our

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

On October 22, 2012, we entered into a revolving credit facility with PNC Bank, National Association to borrow up to $5,000,000. On April 25, 2013, we amended the credit facility to increase the borrowing capacity to $20,000,000. On July 18, 2014, we further amended the revolving credit facility, to, among other things, increase the borrowing capacity from $20,000,000 to $35,000,000. The amended and restated credit facility consists of a Tranche A and a Tranche B, and provides certain security for borrowings under the credit facility. The maximum amount that may be borrowed under Tranche A and Tranche B are $20,000,000 and $15,000,000, respectively. The amended and restated credit facility has a maturity date of July 17, 2016, subject to extension. As of September 30, 2015, $20,000,000 was outstanding on our revolving line of credit. We continue to evaluate possible sources of capital, including, without limitation, entering into additional credit facilities. There can be no assurance that we will be able to obtain any such financings on favorable terms, if at all.

Our advisor may, but is not required to, establish working capital reserves out of cash flow generated by our investments or out of proceeds from the sale of our investments. We do not anticipate establishing a general working capital reserve; however, we may establish capital reserves with respect to particular investments. We also may, but are not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. Our lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Cash Flows Provided by Operating Activities

As of September 30, 2015, we owned 65 multifamily properties. During the nine months ended September 30, 2015, net cash provided by operating activities was $36,702,062 compared to net cash provided by operating activities of $32,452,775 for the nine months ended September 30, 2014. The increase in net cash provided by operating activities is primarily due to the decrease in net loss and the change in gain on sales of real estate partially offset by a decrease in depreciation and amortization expense and changes in the fair value of interest rate agreements, restricted cash, rents and other receivables, accounts payable and accrued liabilities and due to affiliates, net.

Cash Flows Used in Investing Activities

During the nine months ended September 30, 2015, net cash used in investing activities was $23,360,538 compared to net cash used in investing activities of $106,550,890 during the nine months ended September 30, 2014. The decrease in net cash used in investing activities was primarily due to the acquisition of six multifamily properties during the nine months ended September 30, 2014, compared to zero property acquisitions during the nine months ended September 30, 2015. Net cash used in investing activities during the nine months ended September 30, 2015 consisted of the following:

• $23,363,985 of cash used for improvements to real estate investments;

• $299,697 of cash provided by restricted cash accounts related to replacement reserves; and

• $296,250 of cash used to purchase interest rate cap agreements.

Cash Flows Used in Financing Activities

During the nine months ended September 30, 2015, net cash used in financing activities was $6,846,381 compared to net cash provided by financing activities of $74,774,037 during the nine months ended September 30, 2014. The decrease in cash flow from financing activities is due primarily to the increase in distributions to common stockholders and decreases in proceeds from the issuance of mortgage notes payable, borrowings from the credit facility and proceeds from the issuance of common stock. Net cash used in financing activities during the nine months ended September 30, 2015 consisted of the following:

• $28,514,435 provided by proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $595,601 and principal payments of $54,136,297;

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

• $6,000,000 provided by borrowings on our credit facility; and

• $41,360,816 of cash distributions.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At the conclusion of our public offering, our borrowings were approximately 65% of the cost of our real properties (before deducting depreciation and amortization) plus the value of our other investments. Going forward, we expect that our borrowings will be less than 65% of the value of our properties, as determined by an independent third party appraiser or qualified independent valuation expert. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2015, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor. We expect to make payments to our advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2015, we had indebtedness totaling an aggregate principal amount of $1,118,940,967, including the net premiums and discounts on certain notes payable of $3,760,702. The following is a summary of our contractual obligations as of September 30, 2015:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	269,788,279	$	9,238,053	$	74,890,342	$	65,651,521	$	120,008,363
Principal payments on outstanding debt obligations(2)	1,115,180,265		4,907,096		89,683,232		212,979,388		807,610,549
Total	$	1,384,968,544	$	14,145,149	$	164,573,574	$	278,630,909	$	927,618,912

_____________________________

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2015. We incurred interest expense of $10,053,781 and $29,662,052 during the three and nine months ended September 30, 2015, including amortization of deferred financing costs totaling $451,270 and $1,183,398, amortization of loan premiums of $308,698 and $926,094, net unrealized losses from the change in fair value of interest rate cap agreements of $540,376 and $1,908,550 and capitalized interest of $34,268 and $134,943, respectively.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the debt premiums and discounts associated with certain notes payable.

41

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2015 and 2014. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions made during those periods in addition to our value-enhancement strategy. Although the multifamily properties owned as of September 30, 2015 had no change when compared to September 30, 2014, at 65, our results of operations were significantly impacted by the six multifamily properties acquired and three multifamily properties disposed of during the nine months ended September 30, 2014, the phase two portion of one multifamily property acquired, the construction of an additional 96 apartment homes at one existing multifamily property after September 30, 2014 and our value-enhancement activity completed through September 30, 2015, as further discussed below.

Our results of operations for the three and nine months ended September 30, 2015 are not indicative of those expected in future periods. For the three and nine months ended September 30, 2015, we continue the process of value-enhancement projects, which may have a significant impact on our future results of operations. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated value-enhancement projects.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versus non-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (a non-GAAP financial measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Three Months Ended September 30, 2015 and 2014

The following table summarizes the consolidated results of continuing operations for the three months ended September 30, 2015 and 2014:

	For the Three Months Ended September 30,
	2015			2014			Change $			Change %
Total revenues	$	53,166,421		$	50,217,617		$	2,948,804		6	%
Operating, maintenance and management	(14,681,517		)	(13,871,055		)	(810,462		)	6	%
Real estate taxes and insurance	(8,524,454		)	(9,211,396		)	686,942			(7	)%
Fees to affiliates	(5,660,066		)	(5,603,741		)	(56,325		)	1	%
Depreciation and amortization	(16,496,386		)	(15,975,228		)	(521,158		)	3	%
Interest expense	(10,019,513		)	(9,095,277		)	(924,236		)	10	%
Loss on debt extinguishment	—			(1,047,932		)	1,047,932			(100	)%
General and administrative expenses	(1,388,213		)	(1,366,537		)	(21,676		)	2	%
Acquisition costs	—			(255,864		)	255,864			(100	)%
Loss from continuing operations	$	(3,603,728	)	$	(6,209,413	)	$	2,605,685		(42	)%
NOI(1)	$	27,961,843		$	25,257,272		$	2,704,571		11	%
FFO(2)	$	12,892,658		$	9,765,815		$	3,126,843		32	%
MFFO(2)	$	13,626,060		$	11,488,933		$	2,137,127		19	%

________________

(1) NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Investment Program Association as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Loss from continuing operations

For the three months ended September 30, 2015, we had a loss from continuing operations of $3,603,728 compared to a loss from continuing operations of $6,209,413 for the three months ended September 30, 2014. The decrease in loss from continuing operations of $2,605,685 over the comparable prior year period was primarily due to the increase in total revenues of $2,948,804, the decrease in real estate taxes and insurance of $686,942, the decrease in loss on debt extinguishment of $1,047,932 and the decrease in acquisition costs of $255,864, partially offset by the increase in operating, maintenance and management expenses of $810,462, the increase in fees to affiliates of $56,325, the increase in depreciation and amortization expense of $521,158, the increase in interest expense of $924,236 and the increase in general and administrative expenses of $21,676. The improved operations were primarily due to the continued stabilization of our property portfolio.

Total revenues

Rental income and tenant reimbursements for the three months ended September 30, 2015 were $53,166,421 compared to $50,217,617 for the three months ended September 30, 2014. The increase of $2,948,804 was primarily due to the fact that we acquired one multifamily property during the three months ended September 30, 2014 that experienced a full period of operations for the three months ended September 30, 2015, we have acquired an additional one multifamily property since September 30, 2014 and we completed the development of an additional 96 apartment homes at one of our properties during the three months ended September 30, 2015. The sale of two multifamily properties during the three months ended September 30, 2014 partially offset the increase in revenues. Additionally, our total units increased by 387 from 16,235 at September 30, 2014 to 16,622 at September 30, 2015 and our average monthly rent increased from $962 at September 30, 2014 to $998 at September 30, 2015. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and our value-enhancement strategy.

Operating, maintenance and management expense

Operating, maintenance and management expenses for the three months ended September 30, 2015 were $14,681,517 compared to $13,871,055 for the three months ended September 30, 2014. The increase of $810,462 was primarily due to higher costs incurred for utilities, salaries and wages and repairs and maintenance during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended September 30, 2015 were $8,524,454 compared to $9,211,396 for the three months ended September 30, 2014. The decrease of $686,942 was due primarily to negotiating reduced assessed values on certain properties, thereby reducing the real estate tax liabilities. These amounts may increase in future periods as a result of municipal property tax rate increases and/or increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates for the three months ended September 30, 2015 were $5,660,066 compared to $5,603,741 for the three months ended September 30, 2014. The increase of $56,325 primarily was due to the increase in investment management fees due to our advisor from $3,353,069 for the three months ended September 30, 2014 to $3,473,724 for the three months ended September 30, 2015, as well as increases in property management fees due to our affiliated property manager as a result of the growth of our property portfolio. This increase in fees to affiliates expense was partially offset by acquisition fees earned by our advisor for the completion of construction of an additional 96 apartment homes at an existing multifamily property during the three months ended September 30, 2015 of $187,735 compared to acquisition fees of $372,778 earned by our advisor in connection with the acquisition of one multifamily property with an aggregate purchase price of $18,350,000 during the three months ended September 30, 2014. We expect fees to affiliates to decrease in future periods as a result of the decrease in anticipated future acquisitions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the three months ended September 30, 2015 were $16,496,386 compared to $15,975,228 for the three months ended September 30, 2014. The increase of $521,158 was primarily due to the net increase in depreciable and amortizable assets of $47,115,086 since September 30, 2014. We expect these amounts may increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2015 was $10,019,513 compared to $9,095,277 for the three months ended September 30, 2014. The increase of $924,236 was primarily due to an increase in the unrealized loss from changes in fair value of interest rate cap agreements from $46,544 for the three months ended September 30, 2014 to $540,376 for the three months ended September 30, 2015 and a net increase of $57,866,952 in our total notes payable balance from September 30, 2014 to September 30, 2015. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended September 30, 2015 was $0 compared to $1,047,932 for the three months ended September 30, 2014. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of two multifamily properties during the three months ended September 30, 2014. There were no property sales and related repayment and extinguishment of debt during the three months ended September 30, 2015. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal on properties that are sold prior to the scheduled maturity dates of the mortgage notes payable.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

General and administrative expense

General and administrative expenses for the three months ended September 30, 2015 were $1,388,213 compared to $1,366,537 for the three months ended September 30, 2014. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The increase of $21,676 was primarily due to higher audit and tax fees, which were partially offset by lower transfer agent costs for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. We expect general and administrative expenses incurred by our advisor to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the three months ended September 30, 2015 were $0 compared to $255,864 for the three months ended September 30, 2014. The decrease in acquisition costs related primarily to our acquisition of zero multifamily properties during the three months ended September 30, 2015 compared to one acquisition of a multifamily property with an aggregate purchase price of $18,350,000 during the three months ended September 30, 2014. We do not expect to incur significant acquisition costs in the future as we have invested all proceeds from our public offering.

Consolidated Results of Operations for the Nine Months Ended September 30, 2015 and 2014

The following table summarizes the consolidated results of continuing operations for the nine months ended September 30, 2015 and 2014:

	For the Nine Months Ended September 30,
	2015			2014			Change $			Change %
Total revenues	$	156,461,523		$	145,121,380		$	11,340,143		8	%
Operating, maintenance and management	(40,275,265		)	(39,714,602		)	(560,663		)	1	%
Real estate taxes and insurance	(27,310,197		)	(26,412,787		)	(897,410		)	3	%
Fees to affiliates	(16,441,909		)	(18,233,188		)	1,791,279			(10	)%
Depreciation and amortization	(48,832,712		)	(53,637,688		)	4,804,976			(9	)%
Interest expense	(29,527,109		)	(30,292,922		)	765,813			(3	)%
Loss on debt extinguishment	—			(1,939,817		)	1,939,817			(100	)%
General and administrative expenses	(4,405,988		)	(4,552,527		)	146,539			(3	)%
Acquisition costs	(7,145		)	(1,356,146		)	1,349,001			(99	)%
Loss from continuing operations	$	(10,338,802	)	$	(31,018,297	)	$	20,679,495		(67	)%
NOI(1)	$	82,992,328		$	73,475,341		$	9,516,987		13	%
FFO(2)	$	38,493,910		$	22,619,391		$	15,874,519		70	%
MFFO(2)	$	40,624,771		$	31,983,855		$	8,640,916		27	%

________________

(1) See “—Net Operating Income” below for a reconciliation of NOI to net income (loss).

(2) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation FFO and MFFO to net income (loss).

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Loss from continuing operations

For the nine months ended September 30, 2015, we had a loss from continuing operations of $10,338,802 compared to a loss from continuing operations of $31,018,297 for the nine months ended September 30, 2014. The decrease in loss from continuing operations of $20,679,495 over the comparable prior year period was primarily due to the increase in total revenues of $11,340,143, the decrease in fees to affiliates of $1,791,279, the decrease in depreciation and amortization expense of $4,804,976, the decrease in interest expense of $765,813, the decrease in loss on debt extinguishment of $1,939,817, the decrease in general and administrative expenses of $146,539 and the decrease in acquisition costs of $1,349,001, partially offset by the increase in operating, maintenance and management expenses of $560,663 and the increase in real estate taxes and insurance of $897,410. The improved operations were primarily due to the continued stabilization of our property portfolio.

Total revenues

Rental income and tenant reimbursements for the nine months ended September 30, 2015 were $156,461,523 compared to $145,121,380 for the nine months ended September 30, 2014. The increase of $11,340,143 was primarily due to the fact that we acquired six multifamily properties during the nine months ended September 30, 2014 that experienced a full period of operations for the nine months ended September 30, 2015, we have acquired one additional multifamily property since September 30, 2014 and we completed the development of an additional 96 apartment homes at one of our properties during the nine months ended September 30, 2015. The sale of three multifamily properties during the nine months ended September 30, 2014 partially offset the increase in revenues. Additionally, our total units increased by 387 from 16,235 at September 30, 2014 to 16,622 at September 30, 2015 and our average monthly rent increased from $962 at September 30, 2014 to $998 at September 30, 2015. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and our value-enhancement strategy.

Operating, maintenance and management expense

Operating, maintenance and management expenses for the nine months ended September 30, 2015 were $40,275,265 compared to $39,714,602 for the nine months ended September 30, 2014. The increase of $560,663 primarily was due to higher costs incurred for utilities and salaries and wages partially offset by reduced repairs and maintenance and property operating costs during the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the nine months ended September 30, 2015 were $27,310,197 compared to $26,412,787 for the nine months ended September 30, 2014. The increase of $897,410 was primarily due to the acquisition of one multifamily property since September 30, 2014, the continuing operation of the properties owned as of September 30, 2014, ordinary municipal property tax increases and increases in the assessed value of our property portfolio, partially offset by the three multifamily properties disposed of during the nine months ended September 30, 2014. We expect these amounts may increase in future periods as a result of municipal property tax increases as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates for the nine months ended September 30, 2015 were $16,441,909 compared to $18,233,188 for the nine months ended September 30, 2014. This decrease of $1,791,279 was due to an acquisition fee for the completion of construction of an additional 96 apartment homes at an existing multifamily property earned by our advisor during the nine months ended September 30, 2015 of $187,735, compared to acquisition fees of $2,869,680 earned by our advisor in connection with the acquisition of six multifamily properties with an aggregate purchase price of $112,454,157 during the nine months ended September 30, 2014. This decrease in fees to affiliates expense was partially offset by increases to the property management and investment management fees payable to our affiliated property manager and advisor for the nine months

46

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

ended September 30, 2015 as a result of the growth of our property portfolio. We expect fees to affiliates to decrease in future periods as a result of the decrease in anticipated future acquisitions of real estate and real estate-related investments.

Depreciation and amortization

Depreciation and amortization expenses for the nine months ended September 30, 2015 were $48,832,712 compared to $53,637,688 for the nine months ended September 30, 2014. The decrease of $4,804,976 was primarily due to the tenant origination and absorption costs recognized from the significant number of acquisitions made leading up to, and immediately after, the conclusion of our public offering on December 20, 2013 that were fully amortized prior to the nine months ended September 30, 2015. This decrease was partially offset by a net increase in depreciable and amortizable assets of $47,115,086 since September 30, 2014. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2015 was $29,527,109 compared to $30,292,922 for the nine months ended September 30, 2014. The decrease of $765,813 was primarily due to a reduction in the unrealized loss from changes in fair value of interest rate cap agreements from $3,362,058 for the nine months ended September 30, 2014 to $1,908,550 for the nine months ended September 30, 2015, partially offset by a net increase of $57,866,952 in our total notes payable balance from September 30, 2014 to September 30, 2015. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2015 was $0 compared to $1,939,817 for the nine months ended September 30, 2014. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of three multifamily properties during the nine months ended September 30, 2014. There were no property sales and related repayment and extinguishment of debt during the nine months ended September 30, 2015. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal on properties that are sold prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expense

General and administrative expenses for the nine months ended September 30, 2015 were $4,405,988 compared to $4,552,527 for the nine months ended September 30, 2014. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The decrease of $146,539 was primarily due to reduced insurance premiums, partially offset by certain costs of evaluating strategic alternatives for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. We expect general and administrative expenses incurred by our advisor to decrease as a percentage of total revenue.

Acquisition costs

Acquisition costs for the nine months ended September 30, 2015 were $7,145 compared to $1,356,146 for the nine months ended September 30, 2014. The decrease in acquisition costs related primarily to our acquisition of zero multifamily properties during the nine months ended September 30, 2015 compared to six acquisitions of multifamily properties with an aggregate purchase price of $112,454,157 during the nine months ended September 30, 2014. We do not expect to incur significant acquisition costs in the future as we have invested all proceeds from our public offering.

47

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Property Operations for the Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at July 1, 2014. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2014. As of September 30, 2015, 64 properties were categorized as same-store properties.

The following table presents the same-store and non-same-store results from operations for the three months ended September 30, 2015 and 2014:

	For the Three Months Ended September 30,
	2015		2014		Change $		Change %
Same-store properties:
Revenues	$	52,619,689	$	49,987,120	$	2,632,569	5	%
Operating expenses	24,825,490		24,807,794		17,696		—
Net operating income	27,794,199		25,179,326		2,614,873		10	%
Non-same-store properties:
Net operating income	167,644		77,946		89,698
Total net operating income(1)	$	27,961,843	$	25,257,272	$	2,704,571

________________

(1) See “—Net Operating Income” below for a reconciliation of NOI to net loss.

Net Operating Income

Same-store net operating income for the three months ended September 30, 2015 was $27,794,199 compared to $25,179,326 for the three months ended September 30, 2014. The 10% increase in same-store net operating income was primarily due to a 5% increase in same-store rental revenues.

Revenues

Same-store revenues for the three months ended September 30, 2015 were $52,619,689 compared to $49,987,120 for the three months ended September 30, 2014. The 5% increase in same-store revenues was primarily due to the increase in same- store occupancy from 94.8% as of September 30, 2014 to 94.9% as of September 30, 2015 coupled with average rent increases at the same-store properties from $965 as of September 30, 2014 to $997 as of September 30, 2015, primarily attributable to ordinary monthly rent increases and the completion of value-enhancement projects.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2015 were $24,825,490 compared to $24,807,794 for the three months ended September 30, 2014. The same-store operating expenses did not materially change for the three months ended September 30, 2015 relative to the comparable prior year period.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

49

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following is a reconciliation of our NOI to net loss for the three and nine months ended September 30, 2015 and 2014:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Net loss	$	(3,603,728	)	$	(3,337,573	)	$	(10,338,802	)	$	(21,074,163	)
Fees to affiliates(1)	3,661,459			3,725,847			10,558,176			12,714,538
Depreciation and amortization	16,496,386			15,975,228			48,832,712			53,637,688
Interest expense	10,019,513			9,095,277			29,527,109			30,292,922
Loss on debt extinguishment	—			1,047,932			—			1,939,817
General and administrative expenses	1,388,213			1,366,537			4,405,988			4,552,527
Acquisition costs	—			255,864			7,145			1,356,146
Gain on sales of real estate, net	—			(2,871,840		)	—			(9,944,134		)
Net operating income	$	27,961,843		$	25,257,272		$	82,992,328		$	73,475,341

________________

(1) Fees to affiliates for the three and nine months ended September 30, 2015 excludes property management fees of $1,570,816 and $4,621,570 and other fees of $427,791 and $1,262,163, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2014 excludes property management fees of $1,484,356 and $4,301,762 and other fees of $393,538 and $1,216,888, respectively, that are included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

50

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association, or IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the

sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

51

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to our advisor from other sources, including debt, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on

the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

52

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the offering stage and for a period thereafter. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2015 and 2014:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Reconciliation of net loss to MFFO:	2015			2014			2015			2014
Net loss	$	(3,603,728	)	$	(3,337,573	)	$	(10,338,802	)	$	(21,074,163	)
Depreciation of real estate assets	16,458,094			15,035,916			48,502,050			43,476,249
Amortization of lease-related costs	38,292			939,312			330,662			10,161,439
Gain on sales of real estate, net	—			(2,871,840		)	—			(9,944,134		)
FFO	12,892,658			9,765,815			38,493,910			22,619,391
Acquisition fees and expenses(1)(2)	187,735			628,642			194,880			4,225,826
Unrealized loss on derivative instruments	540,376			46,544			1,908,550			3,362,058
Loss on debt extinguishment	—			1,047,932			—			1,939,817
Accretion of below-market leases	—			—			—			(163,237		)
Change in value of restricted common stock to Advisor	5,291			—			27,431			—
MFFO	$	13,626,060		$	11,488,933		$	40,624,771		$	31,983,855

________________

(1) By excluding acquisition fees and expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that operational earnings and cash flows are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses

53

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

will need to be reimbursed to the advisor from other sources, including debt, net proceeds from the sale of properties, or from ancillary cash flows.

(2) Acquisition fees and expenses for the three and nine months ended September 30, 2015 includes acquisition fees of $187,735 and $187,735 and acquisition fees of $372,778 and $2,869,680 for the three and nine months ended September 30, 2014, respectively, that are recorded in fees to affiliates in the accompanying consolidated statements of operations. Acquisition fees and expenses for the three and nine months ended September 30, 2015 also includes acquisition expenses of $0 and $7,145 and acquisition expenses of $255,864 and $1,356,146 for the three and nine months ended September 30, 2014, respectively, that are recorded in acquisition costs in the accompanying consolidated statements of operations.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of September 30, 2015, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 8 of our condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

Item 3. Qualitative and Quantitative Disclosure About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we have, and may in the future, utilize a variety of financial instruments, including interest rate cap, floor and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2015, the fair value of our fixed rate debt was $498,077,896 and the carrying value of our fixed rate debt was $481,763,782. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2015. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and

54

PART I — FINANCIAL INFORMATION (continued)

any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. At September 30, 2015, the fair value of our variable rate debt was $630,223,720 and the carrying value of our variable rate debt was $617,177,185. Based on interest rates as of September 30, 2015, if interest rates were 100 basis points higher during the 12 months ending September 30, 2016, interest expense on our variable rate debt would increase by $6,212,601 and if interest rates were 100 basis points lower during the 12 months ending September 30, 2016, interest expense on the variable rate debt would decrease by $1,200,356.

At September 30, 2015, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.32% and 2.52%, respectively. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2015 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2015 where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2015, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate caps as of September 30, 2015 were not in excess of the capped rates. See also Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, our management, including our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ending September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors contained in Part I, Item IA set forth in our Annual Report on Form 10-K filed with the SEC on March 19, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 9, 2010, our Registration Statement on Form S-11 (File No. 333-160748), registering a public offering of up to $1,650,000,000 in shares of our common stock, was declared effective under the Securities Act and we commenced our initial public offering on July 19, 2010. We offered up to 150,000,000 shares of our common stock to the public in our primary offering and up to 15,789,474 shares of our common stock pursuant to our distribution reinvestment plan. We initially offered shares of our common stock to the public in our primary offering at a price of $10.00 per share and to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. As a result of our determination of our estimated value per share as of March 31, 2012, effective September 10, 2012, the offering price of shares of our common stock in our public offering increased from a price of $10.00 per share to $10.24 per share and the purchase price for shares issued pursuant to our distribution reinvestment plan increased from a price of $9.50 per share to $9.73 per share. Our initial public offering terminated on December 20, 2013. Upon termination of our initial public offering, we had sold 74,245,616 shares of our common stock, including 1,588,289 shares issued pursuant to the distribution reinvestment plan, for gross offering proceeds of $751,234,073 in our private offering and public offering.

From inception through September 30, 2015, we had incurred selling commissions, dealer manager fees and organization and other offering costs in our public offering in the amounts set forth below. The dealer manager reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.

Type of Expense Amount	Amount			Estimated/ Actual	Percentage of Offering Proceeds
Selling commissions and dealer manager fees	$	69,841,541		Actual	9.57	%
Other organization and offering costs	23,802,946			Actual	3.26	%
Total expenses	$	93,644,487
Total public offering proceeds (excluding DRP proceeds)	$	729,992,516		Actual	100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs	12.83		%	Actual	12.83	%

The net offering proceeds to us from our initial public offering, after deducting the total expenses incurred as described above, were approximately $651,745,261 including net offering proceeds from our distribution reinvestment plan of $15,397,232. The ratio of the cost of raising capital in our initial public offering was approximately 12.83%.

We used substantially all of the net proceeds from our public and private offerings to invest in and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2015, we had invested in 65 multifamily properties for a total purchase price of $1,624,892,557. These property acquisitions were funded from proceeds of our offerings and $1,042,964,196 in secured financings.

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PART II—OTHER INFORMATION (continued)

During the three months ended September 30, 2015, we fulfilled redemption requests and redeemed shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Redeemed(1)	Total Number of Shares Redeemed(2)	Average Price Paid per Share(3)	Approximate Dollar Value of Shares Available That May Be Redeemed Under the Program
July 2015	145,015	—	—	(4)
August 2015	109,013	—	—	(4)
September 2015	168,851	—	—	(4)
	422,879	—	—

____________________

(1) We generally redeem shares on the last business day of the month following the end of each fiscal quarter in which requests were received.

(2) We are not obligated to repurchase shares under the share repurchase program.

(3) Pursuant to the program, as amended, we currently redeem shares at prices determined as follows:

• 92.5% of the estimated value per share for stockholders who have held their shares for at least one year;

• 95.0% of the estimated value per share for stockholders who have held their shares for at least two years;

• 97.5% of the estimated value per share for stockholders who have held their shares for at least three years; and

• 100% of the estimated value per share for stockholders who have held their shares for at least four years.

Notwithstanding the above, the redemption price for redemptions sought upon a stockholder’s death or “qualifying disability” will be equal to the average issue price per share for all of the stockholder’s shares purchased from us.

(4) The number of shares that may be redeemed pursuant to the share repurchase program during any calendar year is limited to 5% of the weighted-average number of shares outstanding during the prior calendar year and the value of the shares repurchased shall not exceed $2 million during the quarter beginning July 1, 2015, with shares repurchased each subsequent quarter not to exceed $1 million.

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PART II—OTHER INFORMATION (continued)

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed on this Exhibit Index (following the signatures section of this Quarterly Report on Form 10-Q) are filed herewith, or incorporated by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Steadfast Income REIT, Inc.
Date:	November 12, 2015	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date:	November 12, 2015	By:	/s/ Kevin J. Keating
			Kevin J. Keating
			Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Effective February 1, 2010, Steadfast Secure Income REIT, Inc., Steadfast Secure Income Advisor, LLC and Steadfast Secure Income REIT Operating Partnership, L.P. changed their names to Steadfast Income REIT, Inc., Steadfast Income Advisor, LLC and Steadfast Income REIT Operating Partnership, L.P., respectively. With respect to documents executed prior to the name change, the following Exhibit List refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the three months ended September 30, 2015 (and are numbered in accordance with Item 601 of Regulation S-K).

3.1     Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 6, 2014 and incorporated herein by reference).

3.2     Bylaws of Steadfast Secure Income REIT, Inc. (included as Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (File No. 333-160748) filed July 23, 2009 and incorporated herein by reference).

10.1    Amendment No. 8 to the Amended and Restated Advisory Agreement, dated as of November 10, 2015, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2015 and incorporated herein by reference).

31.1*     Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*     Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**     Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**     Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS* XBRL Instance Document.

101.SCH* XBRL Taxonomy Extension Schema Document.

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB* XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.

____________

* Filed herewith.

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.